October, 2022
The S&P/ASX 200 Accumulation Index rose 6.04 % over the month.
Australian equities were mid-pack relative to other global equities in October. Global developed markets rebounded strongly, as investors became optimistic that central bank tightening was close to done. All major markets finished the month up. In local currency terms the DJ Euro Stoxx 50 returned 9.1%, the US S&P 500 returned 8.1%, the UK’s FTSE 100 returned 3.0% and Japan’s Nikkei 225 returned 6.4%.
Monetary policy settings continued to tighten as the Reserve Bank of Australia (RBA) raised the cash rate target by another 25 bps, to 2.60% in October. While the pace of increases slowed, the RBA also flagged further increases in the months ahead, as part of the process of normalising monetary conditions, albeit subject to future economic data. The board remains committed to ensuring inflation returns to the target range of 2-3%. The run of strong domestic data releases continued through October. Retail turnover posted the ninth straight month of growth, up 0.6%. The annual inflation rate in Australia climbed to 7.3% in Q3 of 2022 from 6.1% in Q2, above market forecasts of 7.0%. This was the highest rate since Q2 1990, boosted by higher prices for new dwelling construction, automotive fuel, and food.
The Producer Price Index for the September quarter also showed continued pressure, particularly in building and engineering construction and electricity, gas and water.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/TASIF_Fund_Update_Oct_2022.pdfSeptember, 2022
The Fund outperformed the broader equities market during the month (on a net basis).
The Fund has delivered a grossed up dividend yield of 11.40% over the past 12 months and continues to exceed its long-term performance objective, by delivering an excess grossed up dividend yield greater than 2.00% p.a. above its benchmark since inception.
The S&P/ASX 200 Accumulation Index was down 6.2% during the month. Australian equities outperformed global equities in September, with the size of our Materials sector a differentiating factor. Global developed markets continued to sell off through September as central banks continued to tighten rates. All major markets finished the month down. In local currency terms the DJ Euro Stoxx 50 returned -5.6%, the US S&P 500 returned -9.2%, the UK’s FTSE 100 returned -5.2% and Japan’s Nikkei 225 returned -6.9%.
Monetary policy settings continued to tighten as the Reserve Bank of Australia (RBA) raised the cash rate target by another 50 bps, to 2.35% in September. The RBA also flagged further increases in the months ahead, as part of the process of normalising monetary conditions, albeit subject to future economic data. The board remains committed to ensuring inflation returns to the target range of 2-3%.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/TASIF_Fund_Update_Sep_2022.pdfAugust, 2022
The S&P/ASX 200 Accumulation Index returned 1.2% during the month. Australian equities outperformed global equities in August on the back of a resilient local reporting season. Global developed markets struggled in August as the rate tightening resolve from the US Federal Reserve dampened investor sentiment. In the major developed markets (in local currency terms), the DJ Euro Stoxx 50 returned -5.1%, the US S&P 500 returned -4.1% and the UK’s FTSE 100 returned -1.1%. In contrast, Japan’s Nikkei 225 returned 1.1%
Monetary policy settings continued to tighten as the Reserve Bank of Australia (RBA) raised the cash rate target by another 50 bps, to 1.85% in August. The RBA expects further tightening in the process of normalising monetary conditions as they are committed to ensuring that inflation returns to the target range of 2-3%.
Domestic economic data releases in August were mixed. Employment unexpectedly fell by 40,900 positions in July, the first fall in nine months. The unemployment rate fell to a new record low of 3.4%, which was also below market expectations. The NAB Survey of Business Conditions strengthened by 6 points to 20 index points in July. Business confidence rebounded 5 points in July, to 7 index points. Retail sales were up 0.2% in June. CoreLogic’s National Home Value Index recorded a fourth consecutive month of value declines, down 1.6% in August.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/TASWF_Fund_Update_Aug_2022.pdfJuly, 2022
Key contributors to relative performance: • The nil holding in Newcrest Mining contributed to performance. Newcrest Mining underperformed on weaker gold prices. In company specific news, while Newcrest’s quarterly results narrowly beat consensus, production concerns were raised around cost inflation. • The overweight in Insignia Financial contributed to performance. Insignia outperformed following an update highlighting a continuation in the improvement of net flows (before pension payments) into its platforms, and it has now reported positive net flows. • An overweight position in Downer EDI contributed to performance. Downer outperformed despite any relevant news or updates by the company in the period.
Key detractors from relative performance: • An overweight position in QBE Insurance detracted from performance. QBE underperformed as the general insurance sector fell on the back of falling bond yields as recession concerns elevated. • The overweight position in Ramsay Health Care detracted from performance. Despite a nonbinding takeover offer to acquire the business by KKR. Ramsay’s share price has drifted whilst waiting for the deal to progress.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/TASWF_Fund_Update_Jul_2022.pdfJune, 2022
Key contributors to relative performance:
• Woodside Energy outperformed, as the BHP Petroleum merger came into effect and was viewed favourably by the market dispelling fears of substantial forced net selling by BHP shareholders who received Woodside Energy stock in exchange for the Petroleum assets. Oil prices were volatile through the month, but little changed as supply concerns and recession risks appear more balanced in oil markets than for metals. • Coles outperformed, as prospects of a recession and along with higher inflation, led investors to favour the defensive characteristics of its supermarket business. The supermarket industry is rational, with cost inflation being readily passed on to consumers, Coles is expected to perform well in this economic environment.
Key detractors from relative performance: • 29Metals underperformed the market largely on the back of falling commodity prices, particularly copper and fears of a more prolonged slowdown in China’s property sector. • The underweight holding in CSL detracted from performance. Behring’s the main blood plasma dependent business unit’s outlook was boosted by data released by the Plasma Protein Therapies Association, confirming previous statements by CSL that plasma collections had recovered to prepandemic levels. • The nil holding in Woolworths detracted from performance. Woolworths outperformed as investors become increasingly concerned about prospects of a recession and a higher inflation outlook, the market valued the defensive qualities of its supermarket business
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/TASWF_Fund_Update_Jun_2022.pdfMay, 2022
Key contributors to relative performance:
• The nil holding in Goodman contributed to performance. Goodman underperformed the market after Amazon reported a softening of consumer demand and may have over committed to industrial space used to manage its inventory. • The nil position in Macquarie contributed to performance. Macquarie reported a record full year profit result driven by very strong market facing business income and asset sales. However, guidance for FY23 was typically conservative and below FY22 and thus the stock underperformed.
Key detractors from relative performance:
• The underweight holding in Commonwealth Bank (CBA) detracted from performance. CBA outperformed after the banks announced results which indicated that margins would improve as rates rise.
• Coles detracted from performance. Along with other consumer staples, Coles gave back the outperformance of the previous month due to weak results from Walmart and Target in the US. However, these results are not relevant to Coles as the issues were in the general merchandise areas, not groceries.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/TASWF_Fund_Update_May_2022.pdfApril, 2022
Key contributors to absolute performance over the month:
• Ramsay Health Care contributed to performance, on the back of a conditional, non-binding indicative proposal from a consortium led by private equity firm KKR. The proposal to buy 100% of the shares in
Aurizon had a strong month contributing to performance, despite rising interest rates. The company announced a favourable Federal Court decision on a technical issue that will give it capital management flexibility going forward. • Orora contributed to performance, supported by it share buy-back and increasing confidence in the turnaround of its North American businesses
Key detractors from absolute performance over the month: • BHP and Rio Tinto detracted from performance. Iron ore prices fell, due to a combination of factors including concerns around rising Chinese COVID cases and strict lockdown policies as well as weaker than expected economic data in China. • Insignia Financial detracted from performance. While its quarterly business update showed an improvement in its funds flows, it was more than offset by the impact of negative market returns on its funds. • Commonwealth Bank detracted from performance, slightly underperforming the market and other banks. While banks performed well during March on expectations of margin benefit from interest rate rises, they gave back some of this outperformance during April.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/TASIF_Fund_Update_Apr_2022.pdfFebruary, 2022
The Fund outperformed the benchmark over the month.
Key contributors to relative performance:
• The nil holding in Wesfarmers contributed to performance. Despite earnings being close to guidance, the very weak results from Department Stores and Officeworks raised concerns. Our view is that the market has been overly focused on the “good” part of Wesfarmers, Bunnings, and ignored the issues in the lesser operations.
• Ardent Leisure contributed to performance, on the back of its primary asset, Main Event, continuing its strong recovery, where revenue is running well ahead of pre-COVID levels
The S&P/ASX 200 Accumulation Index returned 2.1% during the month. Australian equities outperformed global equity markets in February, on the back of a largely positive reporting season. Global markets struggled during the month as rising geopolitical tensions made for an uncertain outlook. In the major developed markets, the DJ Euro Stoxx 50 was down 5.9%, the US S&P 500 was down 3.0% and Japan’s Nikkei 225 was down 1.7% (in local currency terms). The UK’s FTSE 100 bucked the trend to be up 0.3%.
Returns at sector level were wider than normal in February. The best performing sectors were energy (8.6%), consumer staples (5.6%) and materials (5.2%). Utilities (3.4%) and financials (3.0%) also outperformed the broader index. Real estate (1.7%), industrials (0.4%), health care (-0.2%), communication services (-2.2%) and consumer discretionary (-5.0%) all underperformed the broader index, while information technology (-6.6%) was the worst performing sector.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/TASWF_Fund_Update_Feb_2022.pdfOctober, 2021
The Fund underperformed the broader equities market during the month (on a net basis). The Fund has delivered a grossed up dividend yield of 9.52% over the past 12 months and continues to exceed its long-term performance objective, by delivering an excess grossed up dividend yield greater than 2.00% p.a. above its benchmark since inception.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/TASIF_Fund_Update_-Oct_2021.pdfJuly, 2021
The S&P/ASX 200 Accumulation Index returned 1.1% during the month. Australian equities lagged global markets which had mixed results in July. In the major developed markets the US S&P 500 was up 2.4%, the DJ Euro Stoxx 50 was up 0.8% and the UK’s FTSE 100 was up 0.1%. Japan’s Nikkei 225 was the laggard, down 5.2% (in local currency terms).
Monetary policy settings remained unchanged in July, as the Reserve Bank of Australia (RBA) maintained both the cash rate and 3 year yield target at 0.10%. The RBA also indicated it will maintain its government bond purchase program.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/nasif_fund_update-1-1.pdfJune, 2021
The Fund has delivered a grossed up dividend yield of 5.68% over the past 12 months and continues to exceed its long-term performance objective, by delivering an excess grossed up dividend yield greater than 2.00% p.a. above its benchmark since inception.
The S&P/ASX 200 Accumulation Index returned 2.3% during the month. Australian equities outperformed in June on the back of favourable economic data and commodity prices remaining elevated. In major global developed markets the US S&P 500 was up 2.3%, the DJ Euro Stoxx 50 was up 0.7% and the UK's FTSE 100 was up 0.4%. Japan's Nikkei 225 was the laggard, down 0.1% (in local currency terms).
Monetary policy settings remained unchanged in June, as the Reserve Bank of Australia (RBA) maintained both the cash rate and 3 year yield target at 0.10%. The RBA also indicated it will maintain the parameters of the government bond purchase program.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/nasif_fund_update-3.pdfMay, 2021
Key contributors to absolute performance over the month:
• Westpac, National Australia Bank and ANZ Westpac, National Australia Bank ANZ all contributed to performance. Banks reported during May, with results generally well received with impairments at extraordinarily low levels due to writebacks and little mortgage stress.
• IOOF outperformed for the month as it finalised the IOOF MLC acquisition. This will see IOOF almost double its assets under administration, which should provide opportunities for management to deliver on its synergy targets, thus driving earnings growth.
• QBE Insurance outperformed as global peers highligh QBE Insurance ted the continuation of strong double-digit premium rate increases in commercial insurance lines globally, which appears to be flowing into improvements in profitability. This improvement was confirmed by QBE at their AGM in May.
Key detractors from absolute performance over the month:
• APA underperformed the market on little news, with APA the investor day reconfirming previous earning guidance. As an extremely defensive business, the stock was out of favour in May.
• Woodside Petroleum detracted from performance. Loca Woodside Petroleum l oil and gas stocks underperformed the market in May, despite oil prices rising ~3% over the month.
• Despite a grossed up dividend yield of over 9%, Aurizon Aurizon remained out of favour in May. Coal volumes continue to be affected by production issues in Queensland and the breakdown of one of the coal loaders in Newcastle.
• Origin Energy Origin Energy underperformed despite improving electricity futures prices and a rise in oil prices over the month. The Australian energy sector has lagged the commodity recovery and global energy stocks.
• Lendlease underperformed as concerns over the short Lendlease -term impact of the change in CEO and CFO have led to continued weakness in the share price.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/nasif_fund_update-2.pdfApril, 2021
The Fund has delivered a grossed up dividend yield of 5.36% over the past 12 months and continues to exceed its long-term performance objective, by delivering an excess grossed up dividend yield greater than 2.00% p.a. above its benchmark since inception.
Key contributors to absolute performance over the month: • Viva Energy contributed to performance on the back Viva Energy of a strong trading update highlighting a good recovery in fuel volumes outside of Aviation and also strong retail margins.
• BHP and Rio Tinto BHP Rio Tinto Rio Tinto contributed to performance, having outperformed on the back of further strength in iron ore and base metal prices.
• Downer outperformed after announcing further assets Downer sales, and a 10% on-market share buyback. The company also provided a positive trading update at its strategy day.
• Tassal performed well in April as recovering future Tassal s pricing for salmon in the Norwegian market buoyed market expectations that the trough in global salmon pricing is coming to an end.
Key detractors from absolute performance over the month:
• Origin Energy detracted from performance following Origin Energy an adverse outcome in the arbitration with Beach Petroleum over a market price review on a gas supply contract. The astonishingly high price determined will cost Origin an additional AUD 60-80m per annum.
• Aurizon continued to be out of favour in April. Coa Aurizon l volumes for the March quarter were largely as expected with Queensland improving and NSW hit by weather and a coal loader outage.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/nasif_fund_update-1.pdfDecember, 2020
The Fund underperformed the broader equities market during the month (on a net basis).
The Fund has delivered a grossed up dividend yield of 5.96% over the past 12 months and continues to exceed its long-term performance objective, by delivering an excess grossed up dividend yield greater than 2.00% p.a. above its benchmark since inception.
Key contributors to absolute performance over the month:
• BHP and Rio Tinto both outperformed during the month. Commodities surged over December on optimism for China's ongoing strong demand for raw materials. Iron ore in particular has continued to defy market expectations.
• Woolworths outperformed following a spike in panic buying in Sydney given the new COVID-19 outbreak.
• OZ Minerals contributed to performance largely due to the strength in copper. In company specific news, the ramp up of Carrapateena is well on track and almost complete.
• Iluka Resources outperformed along with the mining sector. Iluka's significant China exposure aided its performance, as well as its residual exposure to iron ore through its 20% holding in the recently spun-out Deterra Royalties.
Key detractors from absolute performance over the month:
• Aurizon Holdings underperformed, despite another win in court against the ACCC regarding the Acacia Ridge sale. The market was more focused on the weak coal export volumes and continued noise around China tensions.
• Lendlease underperformed. The company concluded negotiations with the Victorian Government regarding
project over-runs on the Melbourne Metro project, with no further provisions required.
• Origin Energy underperformed, despite sustained strength in oil prices and improving electricity futures prices. The underperformance is likely due to intense competition in retail electricity, which was reflected in the reduction in AGL's earnings guidance late in the month.
• Stockland underperformed despite a lack of news. Speculation on how the new CEO will approach the group's asset mix and approach to capital partnering may have influenced sentiment.
• QBE Insurance underperformed after providing a disappointing market update. QBE flagged elevated catastrophe costs of circa USD 130 million, prior year reserve top ups of circa USD 470 million, as well as a meaningful non-cash write-down of assets.
ticker: TYN0038AU
release_schedule: Monthly
commentary_block: Array
factsheet_url:
https://www.nikkoam.com.au/adviser/products/equities-funds/nikkoam-australian-share-income-fund
Right sidebar -> quick links -> Monthly fund update
Note: PDF is locked
asset_class: Domestic Equity
asset_category: Australia Large Value
peer_benchmark: Domestic Equity - Large Value Index
broad_market_index: ASX Index 200 Index
structure: Managed Fund
manager_contact_details: Array
fund_features:
Nikko AM Australian Share Income aims to provide a tax-effective income stream that exceeds the dividend yield of the S&P/ASX 200 Accumulation Index (grossed up for franking credits) by 2% p.a. over rolling five-year periods, before fees, expenses and tax, plus the potential for capital growth over the long-term. Tyndall’s fundamental, bottom-up, intrinsic value style of investing has been consistently applied by the Manager for over ten years.